A private trucking company heavily entrenched in the automotive industry wanted to diversify to the general commodities business as the automotive industry started to deteriorate. Although they were making progress towards diversification, rumors of the impending GM bankruptcy were making the owners and their lenders nervous.
The Company had revenues in excess of $100 million prior to its restructuring and was funding millions of dollars of losses. Company lenders were long-term partners, who leant based on general lines of credit that became over advanced as the Company become more leveraged over the years. These lenders were seeking to place the Company in an asset based line with stricter covenants, to reduce their over advance and to eliminate credit exposure on insurance instruments. The lender was seeking a turnaround expert to assist in the process.
GGG was retained by the Company to provide an assessment of the business to determine a financing solution for a company with significant losses, declining revenues and a concentration in the automotive industry. GGG was hired to do an initial assessment of the business and was able to work with management to develop a restructuring plan suitable to their lenders.
GGG’s engagement was extended to work with the Company and the lender to negotiate a forbearance agreement, to negotiate agreed upon covenants and to transition the Company from loose reporting into an ABL structure. During this process it was determined that although the Company CFO had been working hard, he was unable to perform in a workout environment. Therefore, GGG stepped into the role of Director of Reorganization and CFO. In the combined roles, GGG restructured management and downsized the company in order to accommodate the reduced revenue stream. By implementing and using 13 week rolling cash flow statements the Company was better able to forecast daily cash needs, divest significant excess equipment refocusing on the Company’s niche of automotive and steel industries, identify profitable routes and customers and eliminated unprofitable geographies, negotiate significant re-working of insurance agreements, refinance equipment assets to more closely align depreciation across the useful life of the equipment, tighten internal controls, implement Key Performance Indicators and management tools to provide visibility to performance on a daily basis, and automate the business through GPS tracking, EDI billing and system integration of accounting and other reporting functions.
A key to restructuring was to rebuild lender confidence in financial controls and forecasting. By downsizing the business and automating manual processes, the Company was able to (i) provide visibility, (ii) manage the business more effectively and (iii) significantly reduce overhead without impacting performance.
Increased lender confidence led the lenders to work with the Company through the GM shut down periods of 2009 which led to a severe cash shortage. With GM’s emergence from bankruptcy, the Company was stronger, more efficient and able to accelerate growth with an operations and financial structure that supported this growth.
Through the third quarter of 2009, GGG solidified the Company by collecting or paying down nearly $2 million of capital from the sale of unused equipment, reducing their letter of credit exposure by getting insurance companies to reduce or release roughly $3 million in collateral, implementing daily reporting systems to management and lenders, hiring and training permanent replacement management, closing non useful terminal and other terminal expenses in line with new budgets, successfully exiting the business in a self sufficient capacity.
GGG worked with the Company for a period of roughly 8 months. In the beginning, the Company was losing money on a monthly basis and facing the threat of liquidation. By quickly implementing a plan to (i) cost cut, (ii) down size the business (iii) implement adequate reporting and systems (iv) provide visibility to management and their lenders, the Company became and continues to be viable and operational. At the end of the engagement, GGG had balanced the company’s ongoing debt service with appropriate collateral while ensuring that creditors were paid according to agreed terms. Today, the Company’s dry van, flatbed and logistics operations continue to operate successfully.